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Despite numerous attempts to isolate the respective importance of intra- and inter-industrial localized knowledge spillovers, their underlying processes have remained hidden. This article aims to provide a better theoretical understanding of the nature of inter-industrial or ‘Jacobs spillovers’ through a broad interdisciplinary literature review and additional evidence gained from a qualitative survey of Canadian inventors. The main stylized processes identified are: (i) adding to, switching or adapting specific know-how to other product lines; (ii) observing something and incorporating it in another environment; and (iii) formal or informal collaboration of individuals possessing different skills and backgrounds. Local economic diversity was found to facilitate these processes in several ways.

Opening up the ‘Jacobs Spillovers’ black box: local diversity, creativity and the processes underlying new combinations